If you haven’t noticed yet, Millennials are different from Baby Boomers, in lots of ways, particularly how they want to handle the financial side of their lives. If you want to be “the wind beneath their wings,” help them design and manage that part of their real financial independence. You’ll need to view them with an eagle’s eye from above and not just watch their feathery underbelly as they soar off into the sunset.
Millennials have different economic pressures:
Pressure #1: Huge Student Loan Debt
According to Bloomberg, “The average balance for each borrower has grown by 74 percent in the last decade, mushrooming from $15,000 per person in 2004 to $27,000 in 2014…” We also know that many students carry an extreme level of debt, pushing $100,000. As Robert Farrington points out in his recent Forbes article, “Everyone is talking about the fact that millennials are off to a slow start economically because of their student loan debt burden. We can scientifically quantify the fact that they are buying homes later, getting their first jobs later, and struggling to leave the nest.” This all results in our Millennials reporting that “47 percent spend at least half their paycheck... ” According to a study by Wells Fargo as outlined in CNN Money. Baby Boomers, I implore you to sit down with your kids and help them to create a workable budget to live on, to save, and to repay their student loans.
Pressure #2: Rent Versus Buy
I am in the process of writing a whole article about how Millennials are choosing to rent apartments and homes instead of buying, as this is an issue plaguing the Millennial generation. The Wall Street Journal reports that, “The financial crisis exacted a heavy toll on the generation of Americans now entering their 30s. Facing difficult job prospects, little-to-no income growth and a historically unprecedented level of student loans, their finances are in a more precarious state…” What has been the effect of all of this? Fortune noted, “Just 22% of 30-somethings who had student debt also owned a home last year. That’s down from 34% in 2008…” Buying a home was part of the Baby Boomer’s “American Dream.” I have still not given up that dream for Millennials. If you can help your offspring to buy versus rent, I would rather not see them throw that rising rental expense out the window every month.
Pressure #3: Working For “The Man”
According to a recent Deloitte Millennial Survey 2015, 70 percent of Millennials say they reject traditional business to work independently. In another study, 1 in 5 said they want to quit their current jobs and start their own projects. This strategy seems to be working. In a survey from Manta, an online community dedicated to small business, 76 percent of Millennial entrepreneurs polled indicated that their businesses are having a successful year so far. As a Baby Boomer, you can help your Millennial to pursue entrepreneurship; however, I advise that they get some of the basics under their belt before venturing off with just a good idea and no plan. A good idea is not enough to make a business a success.
Pressure #4: Fear Of Financial Advice
Millennials saw the “dotcom bubble” and 2008 financial crisis and are weary of both financial markets and who to trust with their money. They are also tired of the reputation Wall Street has garnered. According to Fidelity Investments’ Millennial Money Study, “When asked who (Millennials) trust most for information on money matters, one third (33 percent)…identify their parents as the top choice, but almost one in four (23 percent) indicate they trust ‘no one’ when it comes to advice about money…” The study goes on to indicate that, our offspring, “tend to be more independent and prefer making their own money decisions.” They are not willing to pay for advice in the market. They are skeptical about the honesty of Wall Street as it is depicted as a dangerous place full of creeps. Have you seen the movie, “Wolf of Wall Street?” Millennials did. They want and need basic advice on how to budget and save and get out of debt. They want to learn online at their own pace. A recent survey conducted by U.S. Trust just revealed that more than half of the wealthiest Millennials don’t use financial advisors, as reported in Investment News.
This is a perfect opportunity for you parents to intervene. Your kids actually want to hear from you. If they are telling us loud and clear that they want to learn to invest on their own...help them. This is exactly why I have become involved with a company called, DriveWealth. They are a Broker/Dealer that will supply your Millennial with the education and ability to create their own stock portfolios at a low cost. Your young adult can put a toe-in-the-investing-water via their mobile devices and set up their own investing accounts with wire transfers, credit cards or even Bitcoin.
Pressure #5: Debt Adverse
They are saying, “No” to credit, whereas we Baby Boomers piled it on. According to Bankrate, “63% of millennials (ages 18-29) don’t have a credit card.” The Credit Card Accountability, Responsibility and Disclosure Act of 2009, or CARD Act, made it harder for anyone under the age of 21 to get a credit card. Before that date, credit card companies were invading college campuses and setting up tables during freshman orientation. It’s nice to know that they could lure our college kids into signing up for a credit card with offering a t-shirt. Did the kids accept the cards? Yes. Did they use them? Yes. In fact, during these times, there were 180,000 18-24 year olds, who actually declared bankruptcy. My advice: celebrate the fact that your Millennials don’t want credit cards; however, point out that they do need to build credit and one card is good to have. They should charge small amounts and pay the balance back to demonstrate how they can responsibly handle credit. This will help them to build a sound credit history.
Now, celebrate “Financial Independence Day!”
